Correlation Between PT Bank and NMI Holdings

Can any of the company-specific risk be diversified away by investing in both PT Bank and NMI Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PT Bank and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Bank Central and NMI Holdings, you can compare the effects of market volatilities on PT Bank and NMI Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PT Bank with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and NMI Holdings.

Diversification Opportunities for PT Bank and NMI Holdings

0.64

Correlation Coefficient

PT Bank  NMI Holdings

Poor diversification

The 3 months correlation between BZG2 and NMI is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and PT Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PT Bank Central are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of PT Bank i.e., PT Bank and NMI Holdings go up and down completely randomly.

Pair Corralation between PT Bank and NMI Holdings

Assuming the 90 days trading horizon PT Bank Central is expected to under-perform the NMI Holdings. In addition to that, PT Bank is 2.71 times more volatile than NMI Holdings. It trades about -0.04 of its total potential returns per unit of risk. NMI Holdings is currently generating about -0.09 per unit of volatility. If you would invest  3,480  in NMI Holdings on December 19, 2024 and sell it today you would lose (320.00) from holding NMI Holdings or give up 9.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PT Bank Central  vs.  NMI Holdings

PT Bank Central

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NMI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Bank and NMI Holdings

The main advantage of trading using opposite PT Bank and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, NMI Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NMI Holdings will offset losses from the drop in NMI Holdings' long position.

The idea behind PT Bank Central and NMI Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.